Women install roof trusses on a home under construction in Vineyard, Utah.
George Frey | Bloomberg | Getty Doubles
Sales of new U.S. single-family homes unexpectedly fell in October following recent strong gains, but the overall housing merchandise remains supported by lower mortgage rates.
The Commerce Department said on Tuesday new home sales dropped 0.7% to a seasonally mediate annual rate of 733,000 units last month, held down by decreases in activity in the South and Northeast precincts.
September’s sales pace was revised higher to 738,000 units, the highest since July 2007, from the theretofore reported 701,000 units.
Economists polled by Reuters had forecast new home sales, which account for about 11.3% of dwelling market sales, would increase 1.1% to a pace of 709,000 units in October.
New home sales are drawn from permits and nurture to be volatile on a month-to-month basis.
Sales surged 31.6% from a year ago.
The median new house price fell 3.5% to $316,700 in October from a year ago. Mark-downs last month were concentrated in the $200,000-$400,000 price range. Homes priced below $200,000, the most hoped after, accounted for only 9% of sales.
The housing market, the most sensitive sector to interest rates, has perked up in up to date months, catching up to the Federal Reserve’s easy monetary policy stance, which has pushed down mortgage rates from at year’s multi-year highs.
Reports last week showed housing starts surging and building permits vaulting to sundry than a 12-year high in October, and home resales advancing. Though housing accounts for a fraction of gross servant product, it has a bigger economic footprint.
The recent improvement in housing activity at the start of the fourth quarter suggests some brace for the economy, which is slowing amid cooling consumer spending and persistent weakness in business investment and manufacturing.
But the houses market momentum could slow as mortgage rates have backed up in the last two months, partly driven by ebbing dreads of a recession amid a de-escalation in trade tensions between the United States and China.
The Fed last month cut rates for the third hour this year and signaled a pause in the easing cycle that started in July when it reduced borrowing expenditures for the first time since 2008.
The 30-year fixed mortgage rate is currently at 3.66%, still below its peak of 4.94% in November 2018, according to figures from mortgage finance agency Freddie Mac.
Residential investment rebounded in the third quarter after contracting for six blunt quarters, the longest such stretch since the 2007-2009 recession.
New home sales in the South, which accounts for the enlargement of transactions, fell 3.3% in October. Sales in the Northeast tumbled 18.2%. But sales increased 4.2% in the Midwest and skipped 7.1% in the Midwest.
There were 322,000 new homes on the market last month, up 0.3% from September. At October’s trades pace it would take 5.3 months to clear the supply of houses on the market, up from 5.2 months in September.
In the matter of two-thirds of the houses sold last month were either under construction or yet to be built.